Nifty Analysis

History repeats itself and that is also true for the stock market technical analysis . In fact, much of the technical analysis revolves around historical patterns which repeats themselves time and again. We will discuss one such pattern in this analysis.

Friday was a big day. Market opened with a gap and trended on the upside. How often has this happened in the background? I have gone not far back but till October 2021.

In the last 1.5years I have looked for a few criteria. Market must be trending down that is, forming lower lows and lower highs. Market must break a minor or major swing high with a huge gap. The gap day must be 1.5% or higher in length and close strong (near the high of the day).

I have found that these conditions were met only three times.

The first was in May 2022. Market broke a minor structure at A with large gap and closed strong. But it could not follow through and just managed to fill a bearish gap on the left. Although there was a potential double bottom in the left, yet it just retested the breakout level and broke down to new lows.

The second such event happened in July 2022 at B. Market broke a larger swing high with same conditions as above and rode vertically up to a previous resistance level . It was hell of a ride without any retest (which lately happed in September 2022).

This rare pattern has repeated for the third time on last Friday. All the previous conditions were met.

Now the question is that, can this event lead to a reversal or it is just another support bounce from September 2022 lows?

I would say that the break of a minor structure point does not necessarily means a change in trend. Perhaps it would be too early to announce trend reversal.

However, I do not negate some follow through till the gap zone on the left (17500-600) which will be the first area that may offer strong resistance to the market (as it did at A).

Market needs to retest in order to check the strength of buyers and break above 18135 levels (which may take some time) to further clarify its desired direction.

Thanks for reading.
Do like for more such analysis in the future.